Illumina investors should wait on sidelines

At least one Illumina
analyst is recommending that investors wait on the sidelines as Roche tries to hammer home a hostile bid for the research-tools powerhouse.

The Swiss pharmaceutical giant
reportedly met with a large group of Illumina investors Monday night in an attempt to convince them its $44.50 a share bid was in their best interests.

Maxim Group analyst Bryan Brokmeier said in his note Tuesday that while he sees the deal eventually going through, he doesn’t think Roche will cough up the massive premium that some investors are anticipating. The stock was most recently trading at $51.79.

“We continue to expect that Roche may increase its bid for Illumina; however, we don’t expect Roche to raise its bid to above $60; hence, we don’t believe the risk/reward is attractive,” wrote Brokmeier, who has a hold rating on the stock.

“Although Illumina is currently the market leader and there may be sufficient time for it to develop or acquire the diagnostic expertise necessary to penetrate the diagnostic market, it would be expensive and we’re concerned that the growth priced into shares of Illumina may not be realized, particularly given new competitive risks,” he added.

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